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Congrats Michael! Great to see the success with TinyPilot, glad it's working well for you. Just some questions/thoughts about your revenue/expenses breakdown:

Congrats Michael! Great to see the success with TinyPilot, glad it's working well for you. Just some questions/thoughts about your revenue/expenses breakdown: sales is sales of course, but what does materials mean? Is it the cost-of-materials-for-what-you-sold, or cost-of-everything-you-bought (including both sold items and inventory you're still holding?) The reason is that it's usually more common to only count the former (cost of materials for what you sold) when tracking profit/loss. Materials you used for inventory that are not yet sold are counted as assets on your balance sheet, since the expectation is that you'll be able to turn that into cash at some point. The other practical reason (besides the potential benefit of seeing "profit" in your revenue/expenses breakdown) is that you can better see: 1. If you need to raise prices (and I'm sure patio11 would say "yes") 2. How to handle your inventory, especially if there is a shelf-life. Eg: doing a sale to clear things quickly, or when you need to invest in more materials to build more inventory. You'll start tracking "turn", how quickly you sell out an existing batch, and can better plan for purchasing more to keep a healthy level that is in that Goldilocks-zone of enough-to-fulfill-orders-quickly, but less than holding too much that ties up cash. Congrats again and looking forward to the next update.

mtlynch 6y ago
Thanks for reading! >what does materials mean? Is it the cost-of-materials-for-what-you-sold, or cost-of-everything-you-bought (including both sold items and inventory you're still holding?) It's the latter, cost-of-everything-I-bought. >The reason is that it's usually more common to only count the former (cost of materials for what you sold) when tracking profit/loss. Materials you used for inventory that are not yet sold are counted as assets on your balance sheet, since the expectation is that you'll be able to turn that into cash at some point. Thanks, this is helpful feedback! This is my first time managing an inventory, so I still have a lot to learn about bookkeeping for it. I should mention that the numbers so far are preliminary based on my own bookkeeping, so I'll talk to my accountant about how to better map the transactions to my balance sheet and income statement. >You'll start tracking "turn", how quickly you sell out an existing batch, and can better plan for purchasing more to keep a healthy level that is in that Goldilocks-zone of enough-to-fulfill-orders-quickly, but less than holding too much that ties up cash. That's interesting. I'm curious to see how much this will affect the inventory I keep on hand. Right now, each product consists of several components that have different properties, so when I choose how much to stock each item, it's a function of: * How many orders could conceivably happen during a sudden surge of interest? * How long does it take to restock this item? (some items take 2 months to be manufactured overseas, others ship overnight) * How much space does this item take up in my house? (easy to store 5000 ribbon cables, not so easy to store that many Raspberry Pis) * How much does this item cost? (easier to err on the side of caution for cheap items) * How confident am I that I'm going to keep using this component?
- forgingahead 6y ago
  I should mention that the numbers so far are preliminary based on my own bookkeeping, so I'll talk to my accountant about how to better map the transactions to my balance sheet and income statement. Definitely good to get professional help so you can focus on the business. That being said, don't let them overcomplicate it. The thing about business, especially one that involves inventory, is that you're always looking at both accounting profit/loss, and cashflow. Cashflow is the more important one, especially if you'd like to hit your 600k revenue goals as mentioned elsewhere. You can run an accounting loss almost forever as long as your cashflow is positive. This is how Amazon did it - they paid their suppliers (cash going out) less frequently than money coming in. Interesting about the different component aspects - to get to 600k, I think you will certainly need to build some standardisation into your inventory, in terms of how many finished units you're holding, and establish a buying cadence. One other element that can help plan is what you end up doing for the sales effort. If the sales is consistent (ie, you're blogging and that pulls in a relatively-consistent amount of traffic/sales), then you know your inventory level to plan for, and can just add a buffer. Same with ads/etc, there are ways to make the sales generation more mechanical, which helps with your inventory planning, which is the main driver of your profit. I can share a few books via email if you're keen.
  - casylum 6y ago
    I'd be interested in any book recommendations on this topic too.
  - mtlynch 6y ago
    Thanks! Yes, book recommendations would be welcome. The struggle I've had so far is that I feel like I'm in a weird in-between space between super simple and super complicated. When I look for inventory software, some solutions are for the basic case of people selling t-shirts or sneakers with no concept of subcomponents. And then when I look for software that supports bills of materials or "kitting" it's ultra-complicated and assumes I have multiple warehouses and do everything through purchase orders.
- tompark 6y ago

mtlynch 6y ago

Thanks for reading! >what does materials mean? Is it the cost-of-materials-for-what-you-sold, or cost-of-everything-you-bought (including both sold items and inventory you're still holding?) It's the latter, cost-of-everything-I-bought. >The reason is that it's usually more common to only count the former (cost of materials for what you sold) when tracking profit/loss. Materials you used for inventory that are not yet sold are counted as assets on your balance sheet, since the expectation is that you'll be able to turn that into cash at some point. Thanks, this is helpful feedback! This is my first time managing an inventory, so I still have a lot to learn about bookkeeping for it. I should mention that the numbers so far are preliminary based on my own bookkeeping, so I'll talk to my accountant about how to better map the transactions to my balance sheet and income statement. >You'll start tracking "turn", how quickly you sell out an existing batch, and can better plan for purchasing more to keep a healthy level that is in that Goldilocks-zone of enough-to-fulfill-orders-quickly, but less than holding too much that ties up cash. That's interesting. I'm curious to see how much this will affect the inventory I keep on hand. Right now, each product consists of several components that have different properties, so when I choose how much to stock each item, it's a function of: * How many orders could conceivably happen during a sudden surge of interest? * How long does it take to restock this item? (some items take 2 months to be manufactured overseas, others ship overnight) * How much space does this item take up in my house? (easy to store 5000 ribbon cables, not so easy to store that many Raspberry Pis) * How much does this item cost? (easier to err on the side of caution for cheap items) * How confident am I that I'm going to keep using this component?

forgingahead 6y ago
I should mention that the numbers so far are preliminary based on my own bookkeeping, so I'll talk to my accountant about how to better map the transactions to my balance sheet and income statement. Definitely good to get professional help so you can focus on the business. That being said, don't let them overcomplicate it. The thing about business, especially one that involves inventory, is that you're always looking at both accounting profit/loss, and cashflow. Cashflow is the more important one, especially if you'd like to hit your 600k revenue goals as mentioned elsewhere. You can run an accounting loss almost forever as long as your cashflow is positive. This is how Amazon did it - they paid their suppliers (cash going out) less frequently than money coming in. Interesting about the different component aspects - to get to 600k, I think you will certainly need to build some standardisation into your inventory, in terms of how many finished units you're holding, and establish a buying cadence. One other element that can help plan is what you end up doing for the sales effort. If the sales is consistent (ie, you're blogging and that pulls in a relatively-consistent amount of traffic/sales), then you know your inventory level to plan for, and can just add a buffer. Same with ads/etc, there are ways to make the sales generation more mechanical, which helps with your inventory planning, which is the main driver of your profit. I can share a few books via email if you're keen.
- casylum 6y ago
  I'd be interested in any book recommendations on this topic too.
- mtlynch 6y ago
  Thanks! Yes, book recommendations would be welcome. The struggle I've had so far is that I feel like I'm in a weird in-between space between super simple and super complicated. When I look for inventory software, some solutions are for the basic case of people selling t-shirts or sneakers with no concept of subcomponents. And then when I look for software that supports bills of materials or "kitting" it's ultra-complicated and assumes I have multiple warehouses and do everything through purchase orders.
tompark 6y ago